Case study: Tour Planning at Cirque du Soleil Cirque du Soleil is a Canadian entertainment company. It is the largest theatrical producer in the world. Its theatrical, character-driven approach and the absence of performing animals helped define Cirque du Soleil as the contemporary circus ("nouveau cirque") that it remains today. The case is about the opportunity for Cirque du Soleil management, to include in the tour a new destination, Istambul, in the summer 2010. The decision must be done before the end of 2008. 61 Case study: data and information Louise Murray, Vice-President, Tour Planning and Partnerships at Cirque du Soleil received on 23th December 2008 a proposal to include Istanbul, as destination, in the 2010 tour. “A wide range of administrative formalities and tasks must be accomplished to ensure the transfer of material and people to a new show site. The tearing down, repacking, shipping and setting up must all be done in a very precise order. And because each move is to a new site, often in a new country, the experience is unique every time. A technical problem, customs difficulties, a breakdown or bad weather conditions can all lead to costly delays, sometimes even forcing the cancellation of shows.” 62 Case study: data and information “Our shows are not produced independently of each other. A synergy must emerge between these different cultural works. We can see them as a strategic portfolio of cultural products. Ideally, we would be able to present several touring shows in succession in a large city in order to establish our reputation, build an audience and open the way for the establishment of a permanent show. But you need market depth to do that. Smaller markets require different solutions. For example, shows nearing the end of their touring career are now revamped as arena shows to reduce costs and maximize returns in smaller markets..” 63 CIRQUE DU SOLEIL SHOWS AND DESTINATIONS IN 2008-2009 Touring shows Varekai (Europe) Dralion (Japan) Quidam (Mexico, then Europe as of April 2008) Alegría (South America) Corteo (North Amerca) KOOZA (North America) Arena shows DELIRIUM (Europe) Saltimbanco (North America) Resident shows “O” (Las Vegas, Nevada) Mystère (Las Vegas, Nevada) ZUMANITY – The Sensual Side of Cirque du Soleil (Las Vegas, Nevada) La Nouba (Orlando, Florida) KÀ (Las Vegas, Nevada) LOVE (Las Vegas, Nevada) Macao 2008 (Macao, Chine) Luxor 2008 (Las Vegas, Nevada) Tokyo 2008 (Tokyo, Japan) Seasonal shows Wintuk (New York, New York) From November to January every year Other Cirque du Soleil shows since 1984: Cirque du Soleil The Magic Continues We Reinvent the Circus Nouvelle Expérience Fascination Case study: data and information Twenty-four months from the deadline, the schedules are set and the show dates are sent out internally by the Internal Communications Department, which has now become the custodian of the schedule. The communication of these dates sends a green light to the Marketing Department to initiate promotional and ticket sale activities. Given all these elements, it is easy to see why the 18-month period is considered borderline for ensuring a smooth execution. Turkey would be a new destination for Cirque du Soleil. Cirque has received several unsolicited proposals from promoters to set up a Cirque show in Istanbul in 2010, according to the report emailed by Ines Lenzi to Louise Murray earlier this morning. “Surely that’s a sign that there is interesting potential here!” she muses. Two serious proposals have been received. The first is from Turkey’s Minister of Culture and Tourism. The second was submitted by a promoter in the telecommunications sector. As it does for all the proposals it receives, Cirque has responded with a standard email. This response is a first step aimed at framing the potential business relationship within a commercial logic. “Basically, we ask them to do their homework and to ensure that their proposal is economically viable for Cirque and for them,” Louise Murray explains. This initial contact generally eliminates proposals from groups or individuals that are not backed by a solid organization. In this case, both proposals appear to be supported by serious individuals. In addition, the market potential is good. After taking a quick look at the market studies at her disposal, Louise Murray concludes that Cirque can reasonably expect to sell over 100,000 tickets in Istanbul. This is a realistic scenario. At the same time, she notes that tickets are usually released for sale in this market eight months in advance. 65 Case study: data and information Turkey’s goal is to boost its visibility on the international stage and it has been courting the European Union for several years. Istanbul was designated European Cultural Capital in 2010. The Turkish metropolis, which hopes to draw 10 million foreign tourists in 2010, has announced a series of projects aimed at promoting its historical heritage. With a new leg of the Grand Prix Formula One in Istanbul, Turkey has resolutely set its sights on the West, making it a market with a lot of potential in the coming years. The timing for launching a show in Turkey would thus be perfect for 2010, but the big question is: Is there enough time to put everything in place? The proposal also carries some risks. This is a country that Cirque has never before visited. It has no tried and tested partnerships in this region. Although Turkey is quite Westernized, it doesn’t really know a lot about Turks’ cultural interests. Nor is Cirque familiar with the country’s administrative procedures, particularly in the area of customs and immigration. Many financial aspects also still need to be clarified. Is it easy to get money out of the country? How do its tax laws work? Then, there are the questions of the infrastructure necessary to ensure logistics and the installation of Cirque’s operations. For example, is there a box office network? Will Cirque obtain a site with good potential? As Louise Murray likes to say: “Impossible is just a word. For us, it’s a challenge to go beyond our limits.” Challenges and obstacles will not stop Cirque from coming to Istanbul. “But at the same time, the desire to go beyond our limits should nourish us, not make us burn out,” she adds. 66 Case study: data and information The organization has a motto that Cirque president Guy Laliberté repeats often: “Each opportunity must offer a choice, a creative challenge that lights a spark in us. That is the first criterion in selecting our projects. Also, we have to have fun doing what we do.” For the challenge to become a source of satisfaction, there has to be a good fit between Cirque’s culture and the host country. Cirque has always refused to compromise on artistic expression. The fundamental question thus becomes whether the creative work will resonate with audiences. And the best indicator of that is undoubtedly ticket sales. In short, will the commercial operation be a profitable one? Everything is based on the anticipated gross profit margin of the projects, which, simply put, depends partly on costs and partly on potential ticket sales. The deeper the market, the higher the revenues. However, there is also fierce internal competition to support one project or another. Ultimately, the projects selected will be those that are the most feasible... or at least those that Cirque has the most faith in! It also happens that decisions are made based on a particularly appealing project or for strategic reasons, with the profit margin criterion being put on the back burner. “I don’t systematically try to avoid less profitable destinations. However, it’s my responsibility to highlight the cost of these strategic decisions and to assess whether it’s worth the effort,” explains Louise Murray. 67 For the exclusive use of m. nenni Tour Planning at Cirque du Soleil Appendix 2 Data Used to Calculate a Show’s Profitability1 Average ticket price: $90 Revenue from merchandise sales: 2% of box office revenue Number of seats in the Big Top: 2,500 Average attendance rate for shows: 85% Number of performances per week: 6 the first week, 7 to 10 the following weeks, based on demand2 Average total cost of installation in a city (including tear-down): 1.5 million Fixed costs and amortization of show development costs: 1.5 million Cost of a typical international transfer:3 2 million Average expenditures per week per show: 1 million Additional sponsorship revenue: If Cirque acts alone: between 5% and 20% of boxofficerevenue If Cirque acts with a promoter: between 10% and 80% of boxofficerevenue 1 These data are adjusted for the Turkish market. 2 The first week is limited to six performances because it starts with the end of set-up and the dress rehearsal. For the following weeks, tickets are first released for seven performances per week. If demand is high, extra shows are added, for a maximum of 10 performances per week. Thus, for a typical stay of six weeks, the number of performances can vary from 41 to 56. 3 Turkey is not considered as requiring an international transfer if the show selected is touring in Europe, North Africa, the DoNear East orNot the Middle East. Copy or Post © HEC Montréal 17 This document is authorized for educator review use only by maria elena nenni LUISS University of Rome until April 2015. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860 Preliminary questions 1. Including a new show in Instambul is aligned with the company strategy? 2. What are the available options ? (qualitative answers) 69 Further question 3.